Buying a home for the first time can be stressful, and if you're like most home buyers—that is, you're not planning to pay in cash—then you'll need a mortgage. Finding the best deal on a mortgage can be confusing though, as there are a number of variables that you'll need to consider. But if you're looking for some basic tips to keep in mind when you begin shopping around for a mortgage, look no further. Below are three great tips that will can help you save much needed cash during the process.
No Fees: When Less is More Expensive
Early in your search, you may come across what are called 'no fee' mortgages. While these might look like attractive deals on the surface, it is often the case that the absence of outright fees is more than compensated for in the (much higher) interest rate. So when comparing two different loans, do the math diligently, fees and all. It may be that the loan with dozens of small, upfront fees is actually a better deal in the long run.
The Cost of Owning A Home
Many people become too eager in their quest to own a home and forget about the other substantial costs of ownership. First, before you're even handed the keys, you'll have to pay closing costs on the deal. Then comes property taxes, insurance, and occasional maintenance costs, all of which will amount to several thousand dollars. So don't forget to budget in these expenses (and others such as homeowners association fees if they apply) when you're figuring out what your future monthly budget will look like.
Dealing with Lenders and Brokers
One thing you'll want to distinguish at the very start of your search is two types of services: lenders and brokers. Many different types of lenders exist, including credit unions, large banks, and companies that deal exclusively with mortgages. Many of these lenders also broker mortgages, meaning that they do the heavy lifting when it comes to searching for a mortgage that will best fit your needs and financial situation. But beware of the sometimes hidden costs. Brokers require compensation that is often calculated in points, which can seem confusing, but which essentially amounts to a stated percentage of the transaction that is often due at closing. While brokers can offer invaluable services to first time buyers, make sure you know exactly what you'll be expected to pay.